Bundle Pricing, Reservation and Refund Policies in a Two-Level Supply Chain

Abstract

Refunding and bundling reservation are known as two popular methods to increase profit where in recent years have gained attention of researchers. One main application of refunding policy emerges for online product sale methods, where consumers can be refunded by returning goods which are not favorite according to their interest. Examining three scenarios including refunding, bundle reservation and refunding along with bundle reservation policies, we will investigate a model for each corresponding scenario. We try to compare two refund and bundle reservation pricing policies in a two-level supply chain including one manufacturer and one wholesaler, and we provide a combined model including two products. The demand is constant and also the population-related information about the division of the population into two types of consumers, strategic consumers (consumers who can predict the second stage discount) and myopic consumers (consumers who can not predict the second stage discount) are available. In addition, the percentage of consumers who refund the product due to regret, the inability to install the product or other reasons, is constant and is independent of the amount of refund. We show that the combined model is optimal and has a higher profit margin than any other policy alone.